Regeneron Pharmaceuticals, Inc.’s REGN shares were down 2.7% on Monday following the announcement of its plan of not advancing the nesvacumab and Eylea combination study to phase III development. The decision was taken after two phase II studies evaluating the combination therapy failed to show additional benefit over Eylea monotherapy in patients with diabetic macular edema (“DME”) or wet age-related macular degeneration (“AMD”).

Eylea is currently approved in four indications – DME, wet AMD, macular edema following retinal vein occlusion and diabetic retinopathy (“DR”) in patients with DME.

Shares of Regeneron are up 2% so far this year, slightly outperforming the industry’s 1.1% gain in that period.

The phase II studies – RUBY and ONYX – evaluated two different doses of nesvacumab, an angiopoietin2 antibody, in combination with Eylea in DME and wet AMD, respectively, for improvement in best corrected visual acuity compared to Eylea monotherapy.

The chief scientific officer of the company said that they knew it will be difficult to bring improvement to the already high standard set by Eylea. However, the expected closure of the studies is a setback for the company as a better outcome would have helped the company to ward off competition by setting a higher standard. Eylea is the major source of revenues for the company, generating almost entire product sales.

The combination therapy is being developed by Regeneron in partnership with German-based Bayer BAYRY. The companies will further analyze the data and present it at a future medical meeting

Currently, Regeneron is developing Eylea in a phase III study evaluating the drug in DR patients without DME. The company expects topline data from the study in the first half of 2018.

Meanwhile, Novartis NVS is developing brolucizumab for treating neovascular (wet) AMD. The candidate has demonstrated non-inferiority to Eylea in phase III studies for long-lasting effects in patients. Moreover, it has shown superior improvement in reductions in retinal thickness due to fluid accumulation versus Eylea. A potential approval of brolucizumab will hurt Regeneron’s product sales.

Moreover, Ophthotech Corporation OPHT is also developing its pipeline candidate, Zimura, in a phase IIa study for treating wet AMD with data expected late next year.

Regeneron currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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